Guest article by Sabine Benoit.
The initial idea and promise of the sharing economy was to make use of our idle resources. Unfortunately, it failed.
As a matter of fact, in any given neighbourhood, probably almost all households have a drill that sits idle most of the time. Would it not be better for the use of the world’s resources and the environment if only a couple of households in those neighbourhood have a high-quality drill, and the neighbours would have access to these drills whenever they need them. And the same is true for other assets, like pressure washers, clinical thermometers, chip pans, sewing machines or even cars. It is easy to say that consumers want flexibility, and they fear that if they need a drill, they won’t get access, it might be broken, it might be a lot of effort to arrange access etc. But the demand-side is only one small part of the story of why the sharing economy failed to delivery on the promise of leveraging idle resources.
For the other part of the story, let’s look into the most successful sharing economy companies. The two poster children, Airbnb and Uber, which were only founded around 15 years ago have seen a tremendous growth since then. Initially they were positioned as a saviour of our idle resources. For instance, the initial name of Airbnb which was Air Bed and Breakfast stemming from the idea that someone would sleep on an air mattrass in someone elses apartment. The initial ads to attract Uber drivers were emphasising flexibility and positioned themselves as an alternative opportunity to “part-time gigs, temp jobs or seasonal employment… or maybe you want to supplement your income.” The concept was so new that the initial name of Uber, UberCab lead to a cease-and-desist order in 2010 from the Municipal Transportation Agency in San Francisco. Their argument was that customers might be confused and think the company was running its own car service. We probably all remember the questions circulating on social media during the growth, that the largest taxi company in the world does not own any cars. Uber entered a highly regulated market: To become a cab driver they often need to pass rigorous test and buy expensive licences. In contrast doing some Uber driving with one’s own car was initially meant to be earning a bit of money on the side.
Over the years and likely because the sharing economy is not regulated (yet) this has dramatically changed. On both platforms many drivers and hosts are professionals. Many hosts have bought flats to rent them out on Airbnb, pay the mortgage and after maybe 10 or 15 years own it. The same with Uber, many drivers drive professionally as a full time job, the barriers to do so are extremely low, and they can decide when they want to work. The professional hosts and drivers might appreciate the flexibility, independence and they opportunity that lies in this for them.
However, when we think of the initial idea of leveraging idle resources the exact opposite has happened. For instance, because of more attractive income through Airbnb many long-term rentals have been transferred into short-term rentals driving up rents in attractive areas at the same time pushing renters into less attractive areas. Some coastal cities are virtually empty outside the season when no Airbnb customers are there. Here the sharing economy has created more idle resources not less. The same for Uber drivers, if someone buys a car to become an Uber driver in a city like London, there is one more car on the street and we are not making more use of the (mostly idle) cars that are already there. Consumers might have taken the bus, but because of the affordability and convenience they take an Uber. This is potentially one more trip utilizing more resources. Also, achievements of decades of fighting for employment rights were wiped out by the sharing economy. During the COVID period Uber drivers were largely out of work with no security net.
I’m not against the sharing economy, but we should be honest to ourselves that the initial idea of leveraging idle resources has failed, the sharing economy has just created largely unregulated markets. If we want to fix this, we need to ensure that regulation catches up with reality. In my view and as much as I admit that I like booking apartments from superhosts on Airbnb, professionals should either have no place on sharing economy platforms or they should be regulated in a similar fashion to their corporate equivalents. Only then can the sharing economy delivery on the promise of leveraging idle resources.
If you want to read more about the dark side of the sharing economy, I recommend:
– Mosaad, M., Benoit, S., & Jayawardhena, C. (2023), The Dark Side of the Sharing Economy: A Systematic Literature Review, Journal of Business Research, 168, 114-186.
– Or watch following TEDxTalk: “Revolution, Evolution & Devolution Of The Sharing Economy”|Sabine Benoit.
Professor of Marketing
Department of Marketing
Surrey Business School (Guildford, UK)
Image credit: Sigmund.